The Viral Fever's co-founders battle it out in court against each other

The Viral Fever's Arunabh Kumar has been sued in the Bombay High Court by his former friend and fellow alumnus from IIT-Kharagpur Prashant Raj who is demanding a 4 per cent equity stake in the company as well as cash for his share of work with TVF.Harsimran Julka | ET Bureau | October 27, 2015, 06:18 IST

The Viral Fever's Arunabh Kumar is in the middle of a legal battle which should be able to provide enough material for another hit series.Online entertainment network The Viral Fever made a name for itself with searing portrayals of startup life in its production TVF Pitchers. Now, its founder Arunabh Kumar is in the middle of a legal battle which should be able to provide enough material for another hit series.

Kumar has been sued in the Bombay High Court by his former friend and fellow alumnus from IIT-Kharagpur Prashant Raj who is demanding a 4 per cent equity stake in the company as well as cash for his share of work with TVF. Google also funded TVF under a creator’s innovation programme in 2014. A judge has ruled that Raj is entitled to compensation but not equity, leaving him dissatisfied and proffering an appeal.

As well as useful source material for TVF and its competitors, the episode is casting a harsh spotlight on the perils and pitfalls of starting up. Brilliant startup ideas may be scribbled on paper napkins at college canteens, but unless terms are clearly set forth in legally enforceable documents, the ideas may eventually not be worth the pieces of paper they are written on, experts said.The facts of the case are these: The business started in 2011 and incorporated as a sole proprietorship. Raj joined in 2012 and left in March 2014 after falling out with Kumar. In late 2014, the business was incorporated as TVF Media Labs. Raj’s contention is that he joined "pro-bono as a cofounder" and worked without a salary in lieu of equity in the business.

The origins of his claim lay in an oral agreement whose terms were incorporated in email exchanges between the litigants.

On the other hand, TVF CEO Kumar’s lawyers say that Raj was an early employee and not eligible for equity. "The plaintiff is not eligible for any equity in the company as he is not a part of it any more," said Vinduprakash Pandey, managing partner at Astute Law and counsel for Kumar.

In 2013, there was public dust-up involving the cofounders of online grocer Zopnow. BK Birla accused Mukesh Singh of siding with investors and ousting him. Birla continued to hold equity even after ouster.

"When starting a business we advise cofounders to enter into an agreement clearly spelling out management structure, shareholding structure, ownership over IP assets, and transferability of shares upon exit of any founders," said Aditya K Singh of TMT Law. "The goal of any such agreements are to record common vision of founders on a piece of paper."

In the TVF case, the judge Roshan Dalvi wrote in her August order that subsequent events following the oral agreement meant that Raj’s claim on equity had no validity. "The only entitlement of the plaintiff would, therefore, be for compensation for the work done for the defendant in whichever capacity for about two years," she wrote.

This month, Raj appealed against the order, seeking a review. "The computation of the compensation for my client is yet to be decided. We are asking for an equity of 4 per cent in the company, besides the cash compensation," said Sushrut Desai, legal counsel for Raj.

Raj is also claiming that credits for videos he produced are also being removed by TVF. Experts advise caution prior to registering intellectual property.